Call For 'Wireless Net Neutrality' Just A Little Off-Base

from the heart's-in-the-right-place dept

There's been a lot of talk lately about "Wireless Net Neutrality", kicked off by Columbia professor Tim Wu's paper of the same name, as well as a petition Skype made to the FCC, following on many of his ideas. While some good points have been raised, overall, this "wireless net neutrality" push is a bit of a red herring. Net neutrality is a loaded term that's almost guaranteed to instantly raise people's blood pressure. But it's really a pretty poor term to use here. Wu raises some good points, but much of his paper is undermined by some misunderstandings of the market, and a failure to realize that the highly competitive mobile market is already moving toward openness, so any neutrality regulations would be premature and unnecessary. Click through to the full entry to get the more detailed explanation.Wu's basic contention is that American mobile operators are hurting consumer welfare in several different ways, by influencing handset design and features, and limiting the devices consumers can use on a network. Additionally, he says operators are stifling innovation by making the environment for third-party application development so restrictive. He says that the FCC should make the Carterfone decision -- which decreed in 1968 that AT&T had to allow users to connect any device to their network, as long as it was safe -- apply to mobile operators, mandate net neutrality, and enforce proper disclosure of price plans' rates and conditions.

Wu does highlight several big problems in the industry, and probably the biggest of those is disclosure. We've reported several times how, for instance, Verizon Wireless markets its EV-DO data card service as "unlimited", when it's really anything but unlimited. That's really a problem with their advertising, and with service from other operators who don't have or enforce such restrictions readily available, it doesn't seem like there's really a need to come in with some neutrality regulations in this instance. He also rightly slates the mobile application development environment, which is beset by incompatibility among handsets and various other issues. He's not wrong, here, and while operators do set up some obstacles here, to lay the blame on them is way off-base. Plenty of standards exist in this area, but the problem is largely in how they're implemented by handset vendors. Part of the problem, too, is the wide variety of devices that are already in circulation that have significantly different functionality -- so any change that's going to happen on this one will be quite slow.

But Wu's argument falls short in some other areas. His call for the Carterfone decision to be foisted upon mobile operators is based upon some problematic thinking. For instance, he cites the fact that the Apple iPhone will only be available from Cingular as one example, but what he fails to mention are that certain features of the iPhone, such as Visual Voicemail, are network-dependent, meaning they require cooperation between the handset vendor and the network operator. In addition, on most operators (Verizon being a notable exception), customers are free to use the device of their choice, whether or not it was purchased from that operator. Wu blurs this issue a bit in his paper, directly comparing this point with operators' practice of "locking" phones to their own network, when they're two separate issues. Locking exists so that operators can subsidize handsets and keep their prices low -- something that most consumers would probably prefer to paying full, unsubsidized prices for their phone, just so Wu could switch operators and not have to get a new one. Plenty of outlets for unlocked phones already exist, selling devices at much higher prices than operators, and consumers are free to give them their business.

Wu's paper also contains many points that are simply wrong. For instance, he says that an AT&T/Cingular user who wants to get images they've taken with their cameraphone off of their device must pay for three separate services: '"MediaNet," "Text Messaging" and "Multi-Media Messaging"'. This simply isn't true. It's completely unclear why he thinks a user would need text messaging for this, and while they could use either MMS or a photo-upload application or email over the MediaNet data connection, on plenty of phones they could also use Bluetooth, or on some handsets, copy the photos from a memory card, for free. Some operators have crippled features like Bluetooth -- with Verizon Wireless again the most guilty party -- but on the whole, this has become a much smaller issue than it was a few years ago. He also cites the Nokia E62, a US variant of its E61, which is largely identical, except for WiFi support, as another example of crippling. What he also neglects to mention is the cost of including WiFi, and perhaps rather than having any fear of WiFi, Cingular simply wanted to bring the E61 to market at a low price point. Indeed, the "unrestricted" E61 is easy to find for purchase for anybody in the US that wants it.

Wu's net neutrality concerns and recommendations are also quite shaky. Walled gardens have, for the most part, disappeared from the landscape (once, again, Verizon proving the exception). If customers desire open net access on their mobile phone, they have multiple options available to get it. When nearly every other operator takes a different route than Verizon in this area, are regulations really necessary to bring it in line with its rivals?

Wu's calls for neutrality regulations are premature and unnecessary. The walled garden model isn't sustainable -- the web model he's so fond of has proven that. Part of the reason that it's been able to persist in mobile is that few people really care enough to make it an issue. Most people care about price and coverage -- everything else is incidental. This does have a bit of chicken-and-egg feel to it, since a stifled environment for innovation means there are a limited number of compelling applications and services to make the general public more interested in mobile data services. But, as subscriber growth slows and operators become more focused on increasing non-voice spending, they will need to fix this, and remove many of the barriers to innovation and new services that exist in the market. Walled gardens and locked-down devices won't cut it, as the competitive market -- and yes, it really is pretty competitive, all things considered -- simply won't allow it. The move towards operators fully embracing openness is happening -- slowly, but it's happening.

As far as Skype's petition to the FCC, the less said about this blatant publicity stunt, the better. It's not really clear why this is so important to Skype: a Windows Mobile version of its client software has been available for a long time, and is pretty much open to US mobile users with compatible Windows Mobile devices. It's got little room to expand outside that niche, since its CEO says the company can't seem to get the hang of mobile development. Also, it's a little ironic that Skype's demanding openness and use of standards, when it's eschewed so many standards in the VoIP space, like SIP, in favor of proprietary technologies and systems it refuses to open up.

All in all, mobile operators do plenty of things that deserve scorn from consumers, but with fear of sounding like an apologist for them, much of the criticism here is a little bit misguided. Wu, a person we have a lot of respect for, has written a paper that makes for some interesting reading, and his observations and suggestions on pricing and service disclosure and the poor development environment are largely on point. But this concept of "wireless net neutrality" is one that's built on a very shaky foundation. The market will solve most of these issues, particularly given that so many of them seem to sprout from a single operator. The market is competitive, and any net neutrality or device attachment regulations simply aren't necessary at this point.

Reader Comments

Read Wu's paper

"The market is competitive" - Wu goes to a long way to show this is not the case. A friendly oligopoly is not competitive. Wait until Hutchison 3 goes to the US then you will really understand competitive. Until then Wu's paper stands.
"Wireless net neutrality" - Wu points out that this is not just an issue with Verizon but with Cingular as well. That's 100M mobile phones, and for oligopoly reasons will not change until there is real competition.
"Carterfone" - Wu points out how the natural extension of this principle to wireless as well as wireline communications would solve many of the ills with in effect very little regulation. If anything Wu makes almost no calls for regulation - just that one.

Carterfone and International Roaming

Don't all of the US cellcos support inbound international roaming? Isn't this equivalent to allowing any (compatible) device onto your network, and hence the same as Carterfone? Or does Carterfone also require pricing parity with services delivered to the telco-provided devices?

Skype is as evil as everybody else

just wanted to share some of my own experiences with you... As it's often happening is our politicized society, when someone is talking about making the game fair to consumers, it might just mean the opposite. When I hear about consumer protection acts, I actually think: here comes some more legal base to protect big company FROM consumer claims.
but enough observations, just facts: I recently received a message from Skype, which read: "our free calling services to USA and Canada has ended, if you want to call USA and Canada for free, subscribe to a yearly plan". I thought: this is pretty neat! Plan seems to be fairly cheap and I have a wife in Moscow, Russia. Why not get an unlimited calling plan so that she can be calling me on the cellphone whenever she wants? So, I went to the Skype website and read terms. I felt a little uncomfortable when I noticed that offer is only valid in USA and Canada, but I thought: okay, she might not physically be here, but I am. So as long as I sponsor her purchase, we're fine. In the end, how will they determine where one comes from - by ip address? No way in hell this is going to happen.
guess what - it DID happen. I started noticing that regardless the unlimited calling plan on account, all of her calls were charged per minute anyway. I contacted the customer service to have charges rolled back and received an answer: "you're calling from a foreign IP address, we are not providing this service to outside IPs". This was not mistake - they were dead serious - you can call USA phone for free, but only if your IP is based in USA
Why would that be a case? Skype doesn't incur any additional costs by connecting call coming from an IP in Russia, nor any other one for the same argument. We're not in China. Skype has no pressure from government to limit the freedom of communications. There is no geography in the internet - it's supposed to be one big network where any node freely accesses any other node free of additional cost. So, why is the convenient calling plan being blocked from non-USA ip addresses? The only reasonable explanation is because Skype doesn't want to allow people use discounted rates when they can charge them full price. When it means revenue, it's ok to bend concepts to your own advantage.
Now you should see why I take the struggle of "fair" Skype with "wrong" providers with a grain of salt. Skype is as wrong as they are. It just uses our support to bet a bigger piece of pie and once a piece of pie is received it would exploit consumers with the same unfairness as every other big corporation does

agree but disagree

Some great points, but I think:
a. "network dependent" features is also a bit of a red herring...doesn't really exist if there are proper interfaces between the network and application layers, and even in a legacy ISUP/TCAP enviro, the existing protocols/interfaces can be used.
b. operators aren't supporting WiFi because they are scared of VoIP cannibalization, especially of their high dollar international roaming minutes, as well as users buying apps from app providers that aren't paying the operator a tariff, and using bandwidth that the operator can't charge the user for. good reasons from an operator perspective, but safe bet that handset price points are very low on the list.
c. much of the issue is really that the operators have a monopoly on pervasive mobility...if they sit fat on their monopoly and don't open up the walls then others will eventually come in and build pervasive mobile data networks (that support voice as just one other app) and dethrone them, but they certainly have some time to sit if that's what they choose to do. maybe skype is just trying to put some fire at their feet.

VZW

Some parts are true here. I am lucky enough to get stuck with VZW and if I wan't to get one of them cool new phones I have to wait most likely about a year give or take a few months. I look on e-bay and there are phones every where with only 10% of them being compatible. Verizon has a good lock on their customers to buy their product and none other. I think if I see a phone I should be able to get it not have to wait for things to become compatible with the only network I have the choice of. Openess is a good thing when there are only so many variations of nothing that you can get.

Carriers want Ultimate Control...

Don't be afraid people... use an unlocked phone, it's all the rage to be a rebel and use an unlocked phone that's 'not supported' by the network- give me a break! I've been using unlocked phones for 5 years without a hitch. Consumers just need educated - and many will miss not being able to call in a 'damaged' unit for replacement or after loss.

As to net neutrality, the line needs drawn to allow consumers full access to all the net has to offer - no matter how that access is provided. Cellular carriers will find WiFi and/or WiMax a tangible alternative for others in the coming years as more and more cities become blanketed with wireless. VOIP is a major threat - because there will be someone who will put up wifi as much as we have GSM coverage at least - eventually.

Skype is as wrong as others

just wanted to share some of my own experiences with you... As it's often happening is our politicized society, when someone is talking about making the game fair to consumers, it might just mean the opposite. When I hear about consumer protection acts, I actually think: here comes some more legal base to protect big company FROM consumer claims.

but enough observations, just facts: I recently received a message from Skype, which read: "our free calling services to USA and Canada has ended, if you want to call USA and Canada for free, subscribe to a yearly plan". I thought: this is pretty neat! Plan seems to be fairly cheap and as you know I have a wife in Moscow. Why not get an unlimited calling plan so that she can be calling me on the cellphone whenever she wants? So, I went to the Skype website and read terms. I felt a little uncomfortable when I noticed that offer is only valid in USA and Canada, but I thought: okay, she might not physically be here, but I am. So as long as I sponsor her purchase, we're fine. In the end, how will they determine where one comes from - by ip address? No way in hell this is going to happen.

guess what - it DID happen. I started noticing that regardless the unlimited calling plan on account, all of her calls were charged per minute anyway. I contacted the customer service to have charges rolled back and received an answer: "you're calling from a foreign IP address, we are not providing this service to outside IPs". This was not mistake - they were dead serious - you can call USA phone for free, but only if your IP is based in USA

Why would that be a case? Skype doesn't incur any additional costs by connecting call coming from an IP in Russia, nor any other one for the same argument. We're not in China. Skype has no pressure from government to limit the freedom of communications. There is no geography in the internet - it's supposed to be one big network where any node freely accesses any other node free of additional cost. So, why is the convenient calling plan being blocked from non-USA ip addresses? The only reasonable explanation is because Skype doesn't want to allow people use discounted rates when they can charge them full price. When it means revenue, it's ok to bend concepts to your own advantage.

Now you should see why I take the struggle of "fair" Skype with "wrong" providers with a grain of salt. Skype is as wrong as they are. It just uses our support to bet a bigger piece of pie and once a piece of pie is received it would exploit consumers with the same unfairness as every other big corporation does